In a wide-ranging interview with the FT, Yoshihiko Noda, Japan’s prime minister, has called for clarification about a string of controversial payments made by cameramaker Olympus, saying the furore threatens to tarnish Japan’s reputation as a rules-based market economy.

There are moments when I just quietly despair at the stupidity, gullibility or just downright dishonesty (in the sense of failing to state the truth) of people.

Rule-based economies never, ever work in the end. Only ethics make a market work.

Of course we need them - but the problem with Olympus is not a lack of rules - but the failure to follow them - and that's a choice based on a lack of willing.

None of which undermines the need for massively enhanced transparency - especially country-by-country reporting - which may have revealed what was going on here.

and how’s that? you say ethics must be applied, which is a good idea, but how do we decipher the litmus test as to what will be deemed ethical, because the problems wont arise in the clear cut cases, the disparity in definition will show its self in the more subtle cases. In these subtle cases it will merely become an argument about interpretation, which already happens with ‘rules’.

So if we negotiate these issues 99.99% of the time without needing to resort to ‘rules’ what is the problem with having them? It means the ‘rules’ system works in 99.99% of cases. Pretty good stats in any case.

You have just made the case for getting rid of something that is right effectivly 100% of the time.

I don’t dismiss it at all, read above, as I said it is a nice idea to suggest the use of someones ethical standards to govern actions, but what I am looking at is how this would work in reality. There is no doubt that there are different ethical standards all over the world. It is ethical to kill a family member in some middle eastern countries if they bring shame on your family, that action is clearly not ethical here with western sets of ethics. Ethics vary hugely around the world. Indeed the last example is extreme, but lets take another. In Korea it is not ethical in business to say “No”. You always say yes in a multitude of different ways and it is up to the other person to interpret that yes. In England it is called lying and is unethical because we take the “yes” at face value.

That is what I am saying. We are asking for ethics to be involved in markets, yet there are so many different types of ethics, just as there are many different types of rules. It does not fix the problem, only substitutes it with a different set of problems.

Audit Reform- Speaking as an ex- Auditor (long story), I think you are completely right.
I can give you plenty of ammunition on that one. But that is my point, there is diminshed
advantage in Country by Country Reporting without Audit Reform. Can you imagine, say, a firm of Zimbabwean auditors properly policing Country by Country Reporting? Even if one thinks UK or USA Auditors are not great, from what I have seen when working overseas the rest of the world is worse, and where often they have no concept of Audit.